Legislative Newsletter - December 19, 2006

Number 20

2007 General Assembly Calendar

January 10                    2007 General Assembly convenes; bill pre-filing ends

January 11                    Budget amendments due in House

January 18                    Budget amendments due in Senate

January 19                    All bills and resolutions to be submitted

February 6                   “Crossover” day of bills

State Budget

Governor Kaine submitted his proposed amendments to the 2006-2008 state budget to the General Assembly money committees the end of last week. The amendments propose changes totaling about $1 billion, and project growth in state revenues to be about 6.5% for the remainder of the current fiscal year and about 4% in FY08. About three-quarters of the new expenditures are for one-time, rather than recurring expenses, primarily in the areas of capital outlay, transportation and for the state’s so-called “Rainy Day” fund (a supplemental deposit of $106.7 million in FY07 and a required deposit of $46.1 million in FY 2008). Included in his proposals is a plan to increase the state income tax filing threshold for individuals and couples. This would take about 325,000 people off the state tax rolls (about 175,000 who now file paperwork saying they owe no taxes, and 150,000 who would no longer be obligated to pay).

The governor’s plan earmarks $500 million in general funds for transportation, primarily for several key road projects and for rail and transit capital. This includes the $339 million set aside for transportation uses, but unallocated by the 2006 General Assembly. In his remarks, the governor again stressed the need for long-term, sustainable transportation revenues, noting that transportation dollars have been declining the past year, and that another $110 million reduction is projected by the end of the biennium.

Under the governor’s plan, public education funding is reduced for the remainder of the biennium, primarily due to reductions in student enrollment (the proposal projects about 14,000 fewer students than envisioned in the current plan). State dollars drop by $43.4 million in FY 2007 (the current year) and increase by $26.9 million in FY 2008, largely due to more funding for teacher salaries. The current budget provides a 1½ percent pay raise for SOQ positions; the governor proposes additional money to fund the state share of a 3% salary increase for state-supported positions, effective Dec. 1, 2007. The budget also adds $4.3 million to increase the retiree health care credit and group life rates. Other amendments propose the following:

·        Expand the Early Reading Intervention program ($4.1 million) and the SOL Algebra Readiness program ($3.9 million);

·        More than $4.6 million for the Virginia Preschool Initiative to establish pre-kindergarten pilot programs through public and private settings; providers must participate in a new Quality Rating System being proposed.

·        Language amendments would provide greater flexibility for the Literary Fund interest rate subsidy and technology notes programs.

In the health and human services arena, $16.3 million in additional general funds are proposed for reimbursement to localities under the Comprehensive Services Act, in part to cover declining federal funding. A language amendment requires a study on the feasibility of implementing statewide rates for treatment foster care, which is no longer a Medicaid-covered service.

·    The governor also proposes to increase the auxiliary grant rate for residents of assisted living facilities by $66/month beginning January 1.

·    Just over $700,000 is proposed to increase the number of meals delivered to the elderly through the 25 Area Agencies on Aging. 

·        General funds for the Comprehensive Health Investment Project (CHIP) are increased by $2.2 million in FY08.

·    The budget adds $5.3 million to match federal funds and increase by 170 the slots available for individuals on the urgent waiting list for mental retardation waivers.

·    About $26 million in general funds is added to help meet new federal work participation requirements associated with reauthorization of the federal TANF program. A federal deficit reduction act last year means more TANF recipients must be in an approved work activity, driving a need for employment support and child care services. Without additional funding, Virginia would not be able to reimburse localities for agreed upon expenditures.

·    Finally, language is added to support the purchase of a stockpile of antiviral treatments in conjunction with federal pandemic flu preparedness guidelines, thus making it possible to serve up to 25% of the state’s population if the federal government declares an influenza pandemic.

In public safety, the budget provides an increase of $11.5 million in FY08 for payments to localities and regional jail authorities that provide enhanced retirement benefits to sheriff’s deputies, to recognize the difficulty in attracting and retaining them. Funding is for those localities and authorities that provide the enhanced benefits as of May 1, 2008, and would be based on the local fiscal stress index.

·    HB 599 funds for localities with police departments are increased by $1.1 million in FY08 and there is a $7.7 million hike in jail per diems in the current fiscal year.

·    The governor proposes over $7.6 million to support a variety of activities across six state agencies to strengthen disaster preparation and management. This funding will enhance state disaster agencies; increase statewide emergency planning capabilities; bolster communication with the public and improve the capability to handle families displaced from their homes.

·    Language and $100,000 is targeted for evaluation of the effectiveness and efficiency of local drug treatment court programs.

On the environment front, Governor Kaine will introduce a separate bill that will authorize up to $250 million in bonds for the state share of estimated capital costs for upgrading wastewater treatment plants within the Chesapeake Bay watershed. He also proposes $9.1 million for the Virginia Water Quality Improvement Fund, including $1.6 million for point source and $7.5 million for non-point source nutrient reduction.

·     About $20 million is targeted for fund matching grants for natural area protection, open spaces, parks, farmlands, forest preservation and historic area preservation ($13.7 million) and to help preserve working farms and agricultural land ($5 million).

·    New funding and positions are provided in the second year for oversight of landfills and to enhance solid waste management compliance.

The budget adds $4 million for workforce services program, for total funding of $25 million for this program; funding is used to attract new businesses, retain expanding businesses and ensure Virginia’s workforce is adequately prepared and trained. Also, $2 million in additional funding is targeted for the Virginia Housing Partnership Revolving Fund for loans to meet a broad range of housing needs, including for the elderly, disabled, and homeless. Finally, the budget maintains the general fund amounts required for a 3% salary increase for state employees and state-supported local employees in FY08. The salary increase for state-supported local employees is slated to take effect December 1, 2007. A language amendment is proposed that would include employees of local community corrections programs and pre-trial services programs in the list of employees eligible for state employee pay raises.

Please look for additional information and detail about the budget proposal forthcoming from the VACo and VML staffs.

JLARC Proposes CSA Recommendations

            At a meeting last week, the Joint Legislative Audit and Review Commission (JLARC) released its report on the Evaluation of Children’s Residential Services Delivered Through the Comprehensive Services Act, as directed by HJR 60 (2006). While the report largely targets deficiencies associated with residential facilities, it also makes several recommendations of interest to localities. Specifically, it recommends that the competitive grants program established this past year be expanded to encourage the development of new services. The budget accord reached in late June targeted $750,000 over the two year spending plan for grants to localities to create community-based alternatives for children served in CSA. It also recommends increasing the state appropriation for local CSA administration by $2.5 million to enable all local programs to employ a CSA coordinator. The report says this amount would enable larger localities to employ a full time coordinator and smaller localities to employ one on a half-time basis. The report also recommends that the Office of Comprehensive Services (OCS) provide training to local Community Policy and Management Team (CPMT) members on administering the CSA program.

            In its research for the report, JLARC staff found support for foster families to be a critical gap, and that the lack of regular foster families results in children receiving overly intensive and costly services. More recruitment and support for foster families was recommended. Concerns raised about residential facilities included substandard licensing inspections, inadequate staff training and supervision, and lack of information about child outcomes. The report also found that most facilities appear to charge appropriate rates. However, it did recommend that the OCS gather information about facility performance, including outcome measures, and financial information, including rates. This information could benefit localities that negotiate with providers for services.

            Following the report’s presentation, a joint subcommittee established by SJR 96 to work in tandem with this study, met to discuss its findings, and also a recent Attorney General’s opinion on mental health services for foster care children. The panel agreed to request a JLARC study of the opinion and its potential funding implications for localities.

PDR Panel to Seek Start-Up Funds, More Time

            The joint subcommittee studying long-term funding sources for the purchase of development rights (PDR) to preserve open-space land and farmlands will seek to continue its work for an additional year, broadening its scope to look at all conservation incentive programs. A resolution (HJR 576) to accomplish this already has been submitted to the next General Assembly. The panel was created this past year to examine future need for open-space land, the cost of such needs and long-term funding sources to pay the costs. At its most recent meeting, the last for this year, the group agreed that a dedicated state funding source for PDRs was not likely this coming session; however, it did endorse the following:

• Seeking some start-up appropriations in 2007, as well as adequate funding for the Office of Farmland Preservation, and
• Pushing legislation to authorize the Virginia Resources Authority to raise money for land preservation.

Assuming another year of study, the group will further discuss potential amendments to the Constitution to allow counties to borrow money for land preservation without holding a referendum.

            Virginia faces a January 2010 deadline to preserve 20% of the land in the Chesapeake Bay watershed, as stipulated in the Chesapeake 2000 agreement. Just over 300,000 acres need to be preserved to meet this objective.

HB 599 Funding Options Detailed

            Language approved as part of the state budget this past summer directed a review of the funding formula for distributing state aid to localities with police departments (so-called “599” funds). The “599” statute, originally approved in 1979, was aimed at easing disagreements between cities and towns with surrounding counties over annexation. It directs additional state dollars, primarily to cities and towns, to help reduce the pressure to annex and expand their tax base, while including a moratorium on annexation proceedings.

            The most recent study of the complex funding formula was spurred by projections that nearly 60 localities would receive less 599 funding in FY07, despite growing revenues (the final budget included dollars to ensure no locality receives less in FY07 than it did in FY06). The resulting report, which is being forwarded to the legislature, cites the difficulty in explaining how changes in formula factors (population, crime and welfare rates) affect an individual locality’s funding amount. It notes that what happens to the funding level depends not just on how those variables change for one locality, but also on how they changed for all other localities.

            The report presents a handful of alternative funding methods that were examined by the study workgroup, but does not specifically recommend a preferred alternative. They include continuing the current methodology; using a hold harmless method (as was done for FY07); using an across-the-board percentage increase; setting aside additional funds for those with the highest crime rates; and varying the current method based on population. Three of the five would require an increase in state appropriations each year.

Annual State Spending Reports Released

The Code of Virginia requires JLARC to annually review and report on overall state spending as well as state dollars provided to localities for public education. JLARC staff recently made these reports to senior legislators. The state spending report noted that 27% inflation, state population growth of 14%, agency workload and service population increases, policy choices and maintenance of effort were the primary drivers behind state spending increases over the past decade (FY1997-FY2006). The most general fund appropriation growth has occurred in the Departments of Education and Medical Assistance Services, and for personal property tax relief. In all, 10 state agencies accounted for just over 80% of the general fund budget growth over the ten-year period.

The Standards of Quality (SOQ) report noted that total SOQ state spending in FY2006 was $4.47 billion. Of this amount, $1.98 billion was sent to 10 large school divisions that educate nearly 600,000 of the state’s nearly 1.2 million public school students.

General Assembly Contact Numbers for David Blount, TJPDC Legislative Liaison

804-644-3702 (phone)

804-783-8226 (fax)

979-7310 x350 (Charlottesville voicemail)

(Richmond email)